2023 (2) TMI 1327 - AT - Central Excise

Recovery of irregularly availed CENVAT Credit with interest and penalty - inputs lying in stock with the appellants as on 1.6.2006 - credit of duty paid by Central Warehouse in respect of goods cleared to the Service Centre in the months of June and July 2006 - HELD THAT - The CENVAT credit of the duty paid on the inputs lying in stock, on the date when the goods became dutiable has to be allowed as per Rule 3(2) and the proviso to Rule 9 (2) states that Assistant/ Deputy Commissioner shall allow the CENVAT credit in respect of the inputs etc on recording the satisfaction that the duty has actually been paid on the inputs or input services received by him and utilized by him for manufacture of the goods cleared on the payment of duty. Undisputedly in the present case the goods became dutiable with effect from 01.06.2006. The goods received by the appellant which were subsequently cleared by them on payment of duty were the imported goods supplied to them by the Central Warehouse. No other source of the goods have been identified in the show cause notice or in the order in original. On the basis of Bill of entries, available with the Central Warehouse of the company the duty paid character of the impugned inputs received by the appellant is established beyond doubt and the credit could not have been denied for the reason of not availability of the relevant duty paying invoices - entire duty due and discharged by the Central warehouse in respect of the goods cleared to various service centers have been discharged and reflected in ER-1 of December 2006, however he concludes that ER-1 cannot be considered as authentic evidence for the payment of duty, in respect of the goods received by the appellant. Such a finding cannot be sustained. ER-1 is statutory record and it is not even the case that duty was not paid for which notice has been issued under Section 11 A of the Central excise Act, 1944 or Rule 8 (3) of the Central Excise Rules, 2002. There seems to be no merit in the order. The remand order of the CESTAT has been misinterpreted by the Commissioner adjudicating the matter in case of the Appellant at Nagpur. It was not an open remand order, but was remanded only for limited purpose of verification of the documents with the CENVAT Credit availed by the appellant during the period June-July 2006. Commissioner has in para 21.2 of the impugned order admitted that appellant had submitted the documents and invoices issued by the Central Warehouse during the months of June and July 2006, along with the ER-1. However he has discarded the ER-1 without assigning any reason - the impugned order travels beyond the directions contained in the tribunal order while remanding the matter and has sought to deny the credit on superficial grounds. The impugned order cannot be sustained - appeal allowed.

Summary

Issues Involved:
1. Admissibility of CENVAT credit on inputs lying in stock as on 01.06.2006.
2. Admissibility of CENVAT credit on inputs received prior to registration obtained on 01.05.2007.
3. Validity of the documents submitted for availing CENVAT credit.
4. Invocation of the extended period of limitation.
5. Recovery of interest on inadmissible CENVAT credit.

Detailed Analysis:

1. Admissibility of CENVAT credit on inputs lying in stock as on 01.06.2006:
The issue pertains to whether the appellant could claim CENVAT credit on inputs lying in stock as of 01.06.2006. The Commissioner disallowed the credit of Rs. 15,19,163/- on the grounds that the duty incidence was not passed on to the appellant by the Central Warehouse. It was established that the goods were imported and suffered CVD, but the duty incidence was not transferred to the appellant. The absence of proper records and documentary evidence justifying the stock in quantity further led to the disallowance of the credit.

2. Admissibility of CENVAT credit on inputs received prior to registration obtained on 01.05.2007:
The appellant argued that the goods received from the Central Warehouse were imported on payment of appropriate Customs Duty, including CVD, and therefore, they correctly availed credit. The Commissioner, however, disallowed the credit of Rs. 31,00,320/- due to the inability to link this amount with duty-paying documents. The Commissioner noted that the appellant failed to submit proper records justifying the receipt, storage, and distribution of parts, leading to the disallowance of the credit.

3. Validity of the documents submitted for availing CENVAT credit:
The appellant submitted various documents, including a table describing the bill of entry on a sample basis, a statement giving details of duty paid at the time of import, and ER-1 returns. The Commissioner found these documents insufficient to justify the credit claimed. The Commissioner emphasized that the records submitted were not supported by relevant records maintained during the disputed period, and the authenticity of the documents could not be established.

4. Invocation of the extended period of limitation:
The appellant contended that the demand was barred by limitation as the Show Cause Notice was issued on 23.04.2008, invoking the extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944. The Commissioner concluded that the demand was within the normal period of one year and justified the invocation of the extended period due to the absence of fraud, collusion, or suppression of facts.

5. Recovery of interest on inadmissible CENVAT credit:
The Commissioner ordered the recovery of interest on the inadmissible CENVAT credit under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11AB of the Central Excise Act, 1944. The recovery of interest was deemed a natural corollary to the demand, and the Commissioner cited various judicial precedents to support this conclusion.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The Tribunal found that the Commissioner had misinterpreted the remand order and had denied the credit on superficial grounds. The Tribunal emphasized that the credit should be allowed based on the records and documents submitted by the appellant, and the ER-1 returns should be considered as authentic evidence for the payment of duty. The Tribunal also noted that similar credit was allowed to another service center based on the same type of documents.